Since education makes a person more likely to leave your region, how do you justify your investment in human capital?

Tuesday, August 31, 2010

TechBelt Talent Geography

Many regions can tell a similar startup story. Rapidly growing company attracts outside investment and then relocates to be closer to the venture capital. I'm seeing signs that this game is changing. Home is where the talent is:

A private equity firm based in Florida says that its acquisition of Turning Technologies LLC demonstrates the company has impressive growth potential and that its location downtown is an advantage, not a detriment, to more growth.

"It's not the most obvious place to find a technology company," said Lawrence Shagrin, partner in Brockway Moran & Partners Inc., Boca Raton, Fla. "But, as we looked at Turning, we saw that there are a number of people in northeast Ohio and the Pittsburgh area that don't have the opportunity to work for a growing technology company. The fact that Turning is there is a big advantage."

We’d like to stay in Michigan, but we have a problem. It’s not taxes or regulations. There’s lots of talk about these issues but they have no impact on our business. We spend more on copiers and toner than we do on state taxes. Our problem is access to talent. We have high-paying positions open for patent attorneys in the software and semiconductor space. Even though it is one of the best hiring environments for IP firms in 40 years, we cannot fill these positions. Most qualified candidates live out of state and simply will not move here, even though they are willing to relocate to other cities. … There’s a simple reason why many people don’t want to live here: it’s an unpleasant place because most of it is visually unattractive and because it is lacking in quality living options other than tract suburbia. Some might call this poor “quality of life.” A better term might be poor “quality of place.” In Metro Detroit, we have built a very bad physical place. We don’t have charming, vibrant cities and we don’t have open space.

I disagree with Lou Glazer about the draw of urban amenities. Detroit has much bigger problems than that. But the point about the importance of available talent is on the mark. The emerging economic geography can fuel Youngstown's revitalization. The city is strategically located between two major labor markets. The TechBelt is loaded with brains.

It will happen of necessity as managements try to find ways to do things for employees without increasing payroll costs. The move will be from the expensive coasts to less expensive areas.

This is not a new idea. It has been going on for decades. But the driving force is stronger today, because corporations have less pricing power. If they could find a way to make it work, they would offer a move with a pay cut that still increased the workers' standard of living.

Scarce talent would push firms to cram into regions of escalating costs. What if you could staff your business in a place for 1/10th the price you are currently paying? The point of the above article is that one could give current employees raises without increasing salary. Just move operations to Youngstown. The dynamic is the same. It makes dollars and sense for Turning to stay put.